The Flywheel

Program for friDAY JUNE 20Th

City Lights

In the months and years following Richmond's 2004 financial
crisis, its newly-appointed managers worked
smart and hard
to restore order to our fiscal house. Not only
did they succeed but today, in the grip of a major budget
shortfall (see last week's program
summary),
Richmond stands stronger than most neighboring cities.

Leading the recovery were the two men
who will address the Club on this day: City Manager Bill
Lindsay, and Finance Director, Jim
Goins.

Please make it a point to attend what will be
one of this year's most fascinating and, we believe,
encouraging meetings.

MEETING OF June 13th, 2008

Welcome, Invocation, Thought for the Day

President Pam welcomed the
Rotarians. Glenn led the invocation
and Red-Badger Laura led the pledge.
(So far so good.)

Rotarians with Guests

Ted brought 2 guests: Aliza
Kazmi,
a Salesian High School graduating senior and scholarship
awardee; and Henry Moe, the high school's Director
of Alumni Affairs and the Interact Club sponsor.

Announcements

Ted’s guest, Aliza Kazmi,
addressed the club and offered thanks to Rotarian’s
for providing scholarship funds that will help facilitate
her attending the nations top public university! She
also noted the wonderful impact the Interact Club is
having on providing basic needs for those in third
world countries, and other related efforts towards
the eradication of preventable poverty.

Laura presented the group with the
images that will be used in connection with the Richmond
Police Hotline and Anti-Violence Programs, including
the Gun Buy-Back Program.

Liliane followed up on her presentation
from last week about her great GSE trip to Madagascar
with a picture slide-show presentation. She also
passed around banners from various Madagascar Rotary
Clubs.

Rafael Madrigal is having his insurance
agency’s First Anniversary on Wednesday, June
25th from 5:30 pm to 8:00 pm at 38 Washington Ave.,
Point Richmond. All of the Rotarians who
attended the office opening last year remember the
flowing beverages and great food!

Recognitions

Markku celebrated his 61st Birthday
by dining at the prestigious Denny’s Restaurant
in Emeryville, CA, though his evening of opulence was
nearly side-railed when he learned that the Motel 6,
where he intended to stay the evening was fully booked!

Monique celebrated her anniversary
with the Club and was also very happy that her twin
daughters turned 18 and then, one week later, graduated
high school. She is very happy that all three
of her kids will now be college-bound.

Happy and Sad Dollars

Josh Genser was happy to invite
everyone to his office balcony for Friday Blues Night
on the night of the meeting.

Bob was very happy that his daughter
had completed her Doctorate degree.

George is happy to be the first
to be certified for Reverse Mortgages in Contra Costa
County.

Raffle Results

Margaret drew the white ball and is
the proud owner of one free lunch.

THE PROGRAM

Not waiting for "golden meteors"

Taking time from his busy schedule as the Dean of the
Haas School of Business at UC Berkeley, Dr.
Tom Campbell,
spoke to the Richmond Rotary on Friday
about California’s
current budget crisis. Despite his beaming
personality, our speaker could not be upbeat about our
state’s
$17 Billion deficit.

Dr. Campbell’s “golden meteor” notion
means that just as awaiting the plummet of a golden meteor
plopped onto the front lawn of the Governor’s mansion
is not a prudent financial schema to address the state’s
growing deficit, nor has been funding the state based
on the enormously speculative booming of the technology
sector, or the more recent “bubble”, as many
have described the state and national housing markets. Problematically,
California has balanced many a recent annual budget by
counting funds borrowed in anticipation of similar economic
windfalls, as revenue. When our gracious speaker
advised Governor Arnold Schwarzenegger that the state
had been utilizing this unconventional accounting method,
the Governor characteristically responded “Yah.
Daht’s Bo-gus.”

The state’s deficit for the current fiscal year
is approximately $12 billion and will likely be about
the same next year. We got here
in large part, says Dr. Campbell, because California
does not require a balanced budget. Instead
the legislature and executive branches only need agree
that the budget is “balanced.” No
independent means of validation (a commission or the
Controller’s office) required. Thanks to
this laxity, California is tied with Louisiana
at the bottom of the bond rankings. Accordingly,
we pay among the nation’s highest bond interest. This
year, unless elected officials hammer out a budget agreement,
California will run out of revenue by August. The State
will then resort to “revenue anticipation notes” — essentially
IOUs to Wall Street.

Dr. Campbell’s kibitzed that his “revolutionary
idea” to address this problem is to “not
spend more than (the state) has.” Given that our
budget is built on speculation, that's tough. But there is a
potential solution: base each year’s budget on
that of the preceding year. When we’re pleasantly
surprised by a surplus, use it to shore up our cash reserves.
When we come up short, draw on the reserves.

Dr. Campbell’s
suggestions are apparently solid. Although he modestly
attributes it to “dumb luck”, the year
he was State Finance Director was the only one in recent
memory in which the budget was actually balanced—and
without “bogus” accounting.

On the real estate slowdown and its relation to state
school funding, Dr. Campbell noted that because counties
are obligated to fund public schools, and because their
funding relies on Prop 13 property tax resets when homes
sell (often vastly below market valuations), the current
housing slow-down is a severe blow to the state economy. That’s
because when the counties fall short on their funding
obligations, the state makes up the difference.

Our speaker also cautioned against “scaring businesses
out of the state”, as some have suggested raising
taxes to raise funds for increased services (or just
to meet the needs of those already in place). California
already has higher taxes than nearby states in certain
regards, including the highest state sales tax in the
country. Dr. Campbell fears that additional taxation
will drive away would-be investors.

Dr. Campbell also offered thoughts on several sundry
subjects. He does not favor balancing
the budget by increasing lottery sales, because this,
he says, amounts to a “voluntary tax” on
the poor, and because lottery funds are often diverted
from their prescribed purpose, education. He believes
that term limits have a detrimental effect on our legislature.
A study has shown that in their last term (when they
know it is their last term) legislators actually vote
more frequently with their party. With their eye
on their next job, some departing legislators vote
to keep possible benefactors on their side.

A Rotarian asked “When are you running for governor?” Dr.
Campbell won’t discuss a political career until
he complete his tenure as Dean at the Haas School. However
he did reveal that he turned down an invitation to continue
as Dean because he is considering getting back into politics. We
will keep a keen eye on his progress.

-Your Rotating Editor, Joshua Surowitz

Upcoming Programs

June 27
Almost X-Prez Pam Jones passes on the gavel and the
coconuts as we remember another great year in Richmond
Rotary.

July 4
Night skies bright, club dark.

Have a suggestion for a speaker? Please pass along
the name and contact information to Jim Young.

Writers Wanted
Got a way with words?

At least until the New Yorker magazine contacts you,
consider becoming a Flywheel editor. Talk to Jim Young
for details.